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It is remarkable how ill-informed reporters at even the top news outlets are about basic economic issues. The problems hitting Europe do not mostly stem from budget deficits, they stem from collapsed housing bubbles in the United States, UK, Spain and elsewhere. As a result of incredibly biased and ill-informed reporting, most people in the United States think the problems are budget deficits.

This point is important, because if we can't seriously talk about the problem, then we can't expect to have a solution. The basic path out is a relatively simple one that we learned from Keynes more than 70 years
ago - we have to re-inflate economies. The collapse of these bubbles destroyed tens of trillions of wealth across the world. With the loss of this wealth, economies cannot return to anything close to full employment.

The best way to get economies growing again would be to have central banks, like the Fed, the ECB, and Bank of England, print vast amounts of money with the deliberate goal of raising the inflation rate to 3 to 4
percent. This will reduce the debt burdens of consumers, businesses and governments, and also lower the real interest rate, giving firms more incentive to invest.

The basic economics is really quite simple. Unfortunately, economic policymaking is dominated by creationists and flat earth types who refuse to listen to reasoned arguments. How long will it take before we can get sane people in control of economic policy? That's hard to say, but the process will certainly be hastened by the demise of traditional newspapers (e.g. the Washington Post) that hawk deficit concerns endlessly.

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